The more the ECB waits, the more it will need to give

The more the ECB waits, the more it will have to do to convince the market it can deliver on its price stability objective. QE2 is increasingly consensual among commentators, and market expectations for a decisive further step are building, with expansion, on top of extension, being discussed more and more, in addition to some pricing in of a deposit rate cut. 

In this configuration, the ECB could surprise on the upside on the "when" by accelerating the timing (thus delivering next week), while it is increasingly difficult to surprise on the "what" (the content).

If the ECB waits to announce in December, it risks merely confirming what the market and other macroeconomic agents already seem to be anticipating, in other words, better than nothing, but hardly decisive. 

"In a nutshell, while mere extension could suffice for a move in October, by December the ECB would need to deliver extension and expansion, with the "delta" in purchases possibly being directed toward corporate bonds, to fully re-assure the market and compensate for any further deterioration in the economic outlook that could come with that delay", says Bank of America. 

An insufficient or late reaction could hamper some of the delta in terms of growth that is forecasted for 2016. Communication could be complicated for Draghi next week. In September he was already remarkably dovish. 

He has little space at this stage to "up the ante" and keep the central bank on the right side of the curve without making actual announcements. A compromise solution would be (1) to acknowledge explicitly that a discussion on QE2 is already taking place at the Governing Council and (2) to provide some indicative timing, for instance by stating that the ECB intends to "review" the program at the end of the year as the new forecasts are coming out. 

This would constitute the kind of "near announcement" that would support market confidence. As an example, and unsurprisingly in this environment, the euro pushed towards 1.15 on the back of poor US data. 

Just as unsurprisingly, as this has been a recurrent pattern since April, a Governing Council member broke the purdah period to come out very dovish, explicitly mentioning the ECB's "failure on core inflation," to help bring back the euro toward safer territory.